The People’s Balanced Budget Amendment

May 16, 2012

One proposed solution: amend the Constitution to require that the budget be balanced every year.

Now a couple of activists from the grassroots have come up with a creative new way for Us the People to band together and make it happen: the Balanced Budget Pledge. The idea is simple yet sophisticated: We pledge not to support (monetarily or otherwise) any congressional candidate who has not promised to support a balanced-budget amendment. If enough of us sign on, it will become impossible for any candidate to get elected without supporting the amendment.

They also offer some fun gimmicks. They need donations to maintain the Web site and spread the word. For a $15 donation, they’ll send a physical piggy bank (bearing the People’s Balanced Budget Amendment logo) to a congressman or senator of your choice. For $50, they’ll send three piggy banks and three printed letters about the amendment, to your congressman and both senators.

The Web site also tries to make the national deficit, and the scale of the problem, easy to understand.

I think it’s a good idea. I’m aware of three arguments that have been made against proposed balanced-budget amendments in general: self-enforcement, judicial enforcement, and enforced taxation. I think the People’s Balanced Budget Amendment (PBBA) answers them all.

1 — Self-enforcement

This argument says that the main enforcer of this limit on Congress’s spending would naturally be Congress itself. If Congress is capable of such spending restraint (cough), a constitutional amendment would be superfluous. If not, an amendment would be unenforceable and therefore worthless.

The Gramm-Rudman-Hollings Act of 1985, which enacted automatic federal spending cuts if the deficit exceeded predefined targets, went through hell, high water, and the federal courts before its provisions were allowed to kick in. But when they did kick in, they worked. They worked with a hard and furious vengeance: The deficit was reduced from $221 billion in 1986 to $153 billion in 1989, from 5.2 percent of GDP to 2.8 percent of GDP. In fact, Gramm-Rudman worked so well that Congress, facing real spending constraints for the first time, killed the act, replacing it with the toothless Budget Enforcement Act of 1990.

A subset of this argument is that Congress will in practice enlarge the “emergency” loophole in any balanced-budget amendment until they can drive a train through it, defining “emergency” down until the amendment is no limit at all. But the PBBA requires two-thirds majorities of both houses of Congress to declare an emergency. Some specious emergencies may still slip through, but I think requiring a supermajority changes the dynamic considerably.

2 — Judicial enforcement

This argument says that if Congress, failing to comply with the amendment, passes a budget that is not balanced, someone will sue to enforce the limit, and judges will have to wade into the messy legislative business of deciding what spending to cut or (worse) raise taxes. But I think the PBBA makes the latter impossible: It does not limit this year’s spending to this year’s revenue, but to the average of the previous three years’ revenue (great idea!). If a judge raises taxes in this year, it will do nothing to relax the limit on this year’s spending; and so, presumably, no judge would do it.

As to the possibility that judges would end up cutting spending, the text of the PBBA provides for Congress to enforce it, but in the event that judges did, I’m not sure I can imagine any scenario in which their doing so would be worse than the impending debt crisis.

3 — Enforced taxation

Whether by judges or (due to asymmetrical political pressure) Congress, this argument says that to balance the budget, taxes would be raised, rather than spending cut. But again, the PBBA answers that argument: Spending is limited to the average of the previous three years’ revenue, not the current year’s revenue. Raising taxes now enables more spending only in the future.

A further, stronger answer would be to include another limit on total federal spending (say, to 18% of GDP, likewise measured by averaging the last three years) within the amendment. This would be an alternative “substantively similar” form of the amendment, explicitly endorsed by the PBBA.

9 Responses to “The People’s Balanced Budget Amendment”

The PBBA actually raises some fascinating constitutional questions. As to judicial enforcement, I agree with you that judges would not get involved in enforcing the Amendment, but not because of the structure of the Amendment. Rather, any action to enjoin Congress to comply with the Amendment would almost certainly be a nonjusticiable political question -and I am fairly certain that the Supreme Court would agree – as an action enforce the Amendment would not be capable of judicial resolution. Moreover, any action to enforce the Amendment would be a generalized grievance, and the plaintiff or plaintiffs would therefore not have standing to pursue it. You’re a lawyer, how did you miss this!

Right, and one might think that this amendment would not create any new opening for judicial involvement or otherwise affect the current judicial order. But then, one might have thought the same, on its face, about the Fourteenth Amendment. The text of both provides for Congress to enforce the amendment, not the courts.

True, section 5 of the Fourteenth Amendment grants Congress the power to enforce the provisions 14th Amendment. However, Congress used that power to pass 42 U.S.C. 1983 and other statutes, which give the courts enforcement power over the Amendment. I’m not quite sure how Congress would enforce the Amendment without the courts, quite frankly. With the PBBA, however, I seriously doubt that Congress would ever grant the courts the power to do so, even if they could. Can you imagine some judge in Boise, Idaho trying to figure out which spending programs to cut and which taxes to raise? It would be a hilarious to watch, but the results would be disastrous.

Right, we can all agree that ideally we don’t want judges wading into the messy legislative business of deciding what spending to cut (although, again, I’m not sure I can imagine any scenario in which their doing so would be worse than the impending debt crisis).

As to the Fourteenth Amendment, I’m no expert on civil-rights litigation, but I don’t all of the cases I’m thinking of came in under section 1983. That’s the one that says you can sue your state if it violates your civil rights, right? So, my city puts me in jail for a day by mistake (say, mistaken identity); so I try to sue for false imprisonment. Something like that?

But in many equal-protection and substantive-due-process cases, from Lawrence vs. Texas to Bush vs. Gore, hasn’t the court taken the occasion of a case that was already in court for other reasons (i.e., not initiated by a section-1983 suit) to pass on the constitutionality of laws and government actions?

A lot of the cases, like Lawrence v. Texas, originate as criminal appeals as opposed to 1983 civil actions. But are you saying that the Supreme Court cannot review state court decisions that deprive a criminal defendant of his civil rights? In any event, Lawrence v. Texas could just as easily have been a civil 1983 action, if Lawrence had elected to sue for an injunction before a criminal prosecution was commenced. (note, however, that once the prosecution was officially pending, the Younger abstention doctrine would have precluded Lawrence from suing for a federal injunction under 1983).

Here is my opinion on this. I’ve been accused of being a simpleton by those who know me, but It seems to me in all this discussion of how complex this fiscal problem is the most basic of principles is being overlooked.
I’m not a lawyer or anything, but I’ve been in business a long time, and the last thing you want to do with your money is put the same guy spending it in charge of auditing it.
That’s pretty obvious right? Yet here we are, we’ve given Congress the power to collect taxes at will, spend it at will, and now we’re discussing the complexity of which policy is best in allowing them to self-regulate and audit their spending activities?
Given we have given them the power to break the most basic principle of money management, is it really that surprising that we’re heading towards a fiscal cliff?
Look at it this way, asking Congress to balance the budget through self regulation is like hiring an alcoholic to manage your liquor store. Yes, you have him read sign the rules that state he’s not allowed to consume store product, but yet you’re trusting him to stay clean on his own recognizance.
Truth is, no matter how good his intent, the odds are he’ll eventually succumb to the temptation given enough time in that environment.
Balancing the budget is obviously a good idea, but the concept of self-regulation through a balance budget amendment is just not sustainable as long as Congress has the power to collect, spend, and audit our tax dollars at their discretion. Eventually the law will change to feed the appetite. You know this is true because it has happened time and time again.
So how do we solve the problem? If you don’t want the alcoholic to drink your booze, don’t give him the keys to the store. It’s really that simple in concept.
May I suggest this approach. Change the 16th Amendment of the Constitution to read that only individual States have the power to “lay and collect taxes on incomes, from whatever source derived”… that the Federal Government may only Levy the States, not individuals, for needed revenue. In addition, write into the law that Congress has to show good reason for the expenditure. Give the States the right to challenge any tax the federal government may levy if they feel the request is excessive and without merit. Further, allow the States power to use the taxes they collect to pay for programs that can be run more effectively by the State. In short, put the States in the position of managing tax dollars and balancing the budgets and minimize the Federal Governments role in this regard.
Why do it this way?
(1) It would eliminate costly duplicity in tax collections. Most States have a tax collection system in place already, often nearly identical to the IRS. Why are we spending billions of dollars every year to have the IRS collect taxes when most States already have tax collection agencies capable of collecting Federal Taxes? BTW…we don’t need a constitutional amendment to make this happen.
(2) It changes a very complex and confusing system of taxation to a very simple formula. Have the IRS levy each State based on a percent of State Revenue…simple. Let the States figure out how to pay the levy by taxing the people and businesses in a way that best meets the needs of the State. We already know that this works because most States have a little different method of taxation now.
(3) Its serves as a mechanism to hold Congress and the Administration financially accountable through a natural checks and balances budget process.
Right now if Congress wants to spend money, whether it’s administrative or legislative, they simply add it to the budget or pass legislation. There is little accountability. Like I said earlier Congress has the power to collect taxes as they see fit, spend the money as they see fit, and then audit whether or not it is being spent wisely. If they need more money they up taxes to pay for it. It is further convoluted by an incredibly complex tax collection process.
In contrast, by giving States the ability to challenge expenditures DIRECTLY, the entire political landscape changes. For example: Let’s say a piece of legislation is being voted on that is full of pork barrel that favors the State its author represents. To pay for the Pork every States levy would be increased. Instead of trying to force line item veto’s to fix this problem, under my proposal most States would resist this expenditure and challenge it. Why? Because under my proposal tax dollars would flow to the individual States first and then to the Federal Government as a percentage of Revenue. This being the case, every State will naturally want to keep as much of those dollars for themselves by reducing what they pay in levy to the Federal Government. Thus each State would be reluctant to pay for something that didn’t favor them in some way. Congress would have to show reasonable cause as to why everyone’s expense should go up to benefit one State. Administrative expansion would be held in check the same way.
(4) This amendment would cause members of Congress to be more honest and favor reducing federal spending.
As it stands, State Representatives fight for tax dollars to flow into there respective States through Pork Barrel and other means. They do this to keep their constituents happy and the donations flowing. They’re really don’t care what the ultimate cost is to the taxpayer, and that is in part why we have such a mess fiscally… it’s all about getting re-elected.
In contrast, my proposal realigns the motivation. They would fight to keep others from taking revenue from their State. This would include the administration. In other words, to keep the donations flowing and constituents happy so they can get their vote, they are motivated to keep the tax dollars from flowing out of State. They would fight to keep Federal Administrative costs as low as possible.

Thank you for explaining your interesting proposal. I’m all in favor of realigning our political representatives’ motivations, as you say. You may well be right that what I understand to be the central idea of your proposal—having the federal government tax states at a percent of their tax revenues, rather than individuals at a percent of their income—would realign those incentives in a good direction. I’ve never heard this idea proposed before; I’ll continue to think it over.

I suppose it could be a very good thing by working the opposite of the way things like Medicaid work. There, if I understand it, the federal government promises to pay states a fraction of their costs, allowing a state government to expand the entitlement program, get all the political benefit of that expansion, and pay only part of the fiscal cost of it. Here, potentially, the state government would bear the full political cost of any increase in income taxes on individuals, but receive only part of the tax moneys, giving it an incentive to keep taxes low.

On the other hand, I can also imagine that there might be some perverse side effects that I haven’t thought of.

“Look at it this way, asking Congress to balance the budget through self regulation is like hiring an alcoholic to manage your liquor store.”

Sure, good point. As I said, I’m definitely in favor of re-thinking the incentive structures of our government, and I’ve long wondered whether we shouldn’t just repeal the Seventeenth Amendment. But ultimately any system presumably has to have someone make the final decision. If not Congress, who?

“In addition, write into the law that Congress has to show good reason for the expenditure. Give the States the right to challenge any tax the federal government may levy if they feel the request is excessive and without merit.”

Right, Congress has to show good reason, but who decides whether it’s good enough? Congress? Surely you don’t mean that, because then we’re back in the problem you already pointed to, Congress policing itself. When a state “challenges” the federal government, who decides between the two parties? The state? Congress? If it’s either of them, then don’t we risk the same kind of tendency you’ve identified, and the party that has the final say will tend to rule in its own favor?

If the courts, then I think we have a different problem. Do we want judges setting tax policy? As many problems as there are with Congress’s actions, at least the members of Congress are elected and (to some extent) accountable to the people. Federal judges, by design, are not.

“that the Federal Government may only Levy the States, not individuals, for needed revenue.”

By the way, isn’t this how we did it under the Articles of Confederation, before the Constitution? Do I remember correctly that the states were able to make the federal government a pauper and virtually powerless, which is a big part of why we created the Constitution?

“Eventually the law will change to feed the appetite.”

Right, except that I was talking about a balanced-budget constitutional amendment. Congress cannot just reverse a constitutional amendment at their pleasure. They have to get a lot of states to ratify the decision. Meanwhile, of part of your proposal, you said,

“BTW…we don’t need a constitutional amendment to make this happen.”

Right, which is fine, but the other side of that coin is that it is potentially subject to the same objection you just raised—Congress can reverse it at any time, and will presumably have an incentive to do so.